We are often asked the question on how to qualify for an FHA loan. Before we go over the requirements, let’s explain what an FHA loan is. An FHA loan is insured against default by the Federal Housing Administration. Thus, the FHA guarantees that a lender don’t need to write off a loan if the borrower defaults. In this case, the FHA will pay. Lenders are willing to give out larger mortgage loans because of this guarantee.
FHA loans are considered to be an easier mortgage loan type that anyone can qualify for. Aside from that, their loan requirement guidelines have some flexibilities than other types of mortgage loans. It only requires less than 5% down payment.
This type of loan is easier to use gifts for down payments and clearing costs. Aside from that, an FHA loan may be assumable. No prepayment penalty is also required.
FHA loans also provide funding for home improvement and possible leniency during financial hard times. However, this loan is not for everybody. In order to qualify, you need to meet these requirements:
1. You need to have at least two years of steady employment with the same employer. Show some documents to prove your job stability.
2. Your income for the last two years should be the same or increasing.
3. Your credit report should have less than 2 thirty day late payments in the past two years. You should also have a minimum credit score of 620 or even higher.
4. No bankruptcies must be filed two years before your mortgage application. You need to keep a clear record.
5. No foreclosures should be filed three years before your mortgage application.
6. New mortgage payment should be 30% of your gross income.
These are the basic qualifications that you need to prepare. More documents can be asked depending on the situation of the applicant. It is important to prepare all these documents so the process will be continuous.
Planning ahead and preparing yourself before you decide to get a mortgage loan is essential. This will give you enough time to get a good credit score. You can come out with different solutions in getting a high credit score fast and easy. You just need to find a way to settle your loans before the due date.
Normally, it takes a few years before you can tell yourself that you are fully ready to get an FHA loan. You need to settle your existing loans at least 2 years before your mortgage application. Aside from that, you also need to make sure that you won’t have any problems in your job stability. Those who work for a company for 10 years or more have greater shot in applying for a loan.
In order to avoid bankruptcies, it is important to assess properly so you can see it coming. All in all, you have to protect your credit ranking and credit score before you apply for an FHA loan.
To see if you qualify for an FHA home loan please contact an Omni Mortgage Professional at 866-955-4466.